market-definition

# Market Definition ## Metadata - **Name**: market-definition - **Description**: Market boundary definition framework - **Triggers**: market definition, market boundaries, substitution, TAM SAM SOM ## Instructions Define what constitutes a market using the substitution principle for analysis purposes. ## Framework ### The Substitution Principle A market is defined by customer choice between substitute options. ``` Customer's Choice: Product A VS Product B VS Do nothing IF: Customer can switch between Product A and Product B AND: Switching is not costly or disruptive THEN: They are in the SAME market IF: Customer would NOT switch to Product B OR: Switching would be costly or disruptive THEN: They are in DIFFERENT markets ``` ### Market Definition Process 1. **Identify purpose** - Why define this market? 2. **List products** - What are we analyzing? 3. **Identify substitutes** - What alternatives exist? 4. **Apply substitution test** - Would customers switch? 5. **Define boundaries** - Geography, time, customer type 6. **Validate with data** - Check assumptions 7. **Document clearly** - Clear definition statement ## Output Format ``` ## Market Definition: [Industry/Product] ### Purpose **Why Define This Market:** [Analysis reason] **Application:** [What will this definition be used for] --- ### Product List | Product | Current Players | Substitutes | Same Market? | |---------|----------------|-------------|----------------| | [Product A] | [List] | [List] | ✅ Yes | | [Product B] | [List] | [List] | ✅ Yes | | [Product C] | [List] | [List] | ❌ No | | [Do Nothing] | [Option] | - | ❌ No | --- ### Substitution Analysis | Substitution Criterion | Assessment | Finding | |---------------------|----------------|-----------| | **Price Sensitivity** | [High/Med/Low] | [Analysis] | | **Switching Costs** | [High/Med/Low] | [Analysis] | | **Functional Equivalence** | [Yes/No] | [Analysis] | | **Customer Preference** | [Analysis] | **Conclusion:** - [Analysis of which products are in same market] - [Definition of market boundaries] --- ### Market Definition **Scope Statement:** "[Clear statement of what constitutes the market]" **Includes:** - [List of products included] - [List of products excluded] - [Geographic boundaries] - [Customer segments] - [Time period considered] **Excludes:** - [Products not in this market] - [Adjacent markets] - [Different time periods] --- ### Validation Tests | Test | Result | Confidence | |------|--------|--------|-----------| | Substitution test | ✅ Confirmed | High | | Pricing check | ✅ Verified | High | | Share analysis | ⚠️ Needs validation | Medium | --- ### Strategic Implications 1. **[Implication 1]** - [Analysis] 2. **[Implication 2]** - [Analysis] ### Boundary Map ``` ┌─────────────────────────────────────┐ │ │ │ MARKET X (Product A) │ │ │ │ Includes: │ │ Product A │ │ Product B │ │ Product C │ │ Do Nothing │ │ │ └─────────────────────────────────────┘ ┌───────────────────────────────┐ │ │ │ ADJACENT MARKET Y │ │ Product D │ │ Product E │ │ Product F │ └───────────────────────────────┘ ``` ## Tips - Be conservative - when in doubt, assume different markets - Consider customer switching costs - both monetary and non-monetary - Test with real customers - don't assume theoretical behavior - Document assumptions clearly - boundaries matter for market sizing - Update regularly - products and markets evolve - Use quantitative thresholds - what defines "significant" switch? - Consider indirect substitutes - new alternatives can emerge ``` ## References - Porter, Michael. *Competitive Strategy*. 1980. Chapter 2. - Various industry analysis and market research sources